Buying an Electric car using Car Loan

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A senior citizen is weighing whether to buy an electric car using an SBI loan, funded by their SBI Fixed Deposits, or to pay cash. They plan to use the FD interest to cover loan EMIs and claim tax benefits under Section 80EEB for the loan interest. The core question is which approach is more financially sound, considering the interest rate difference and potential tax savings against the cost of paying upfront.

Joshy Manjaly

Joshy Manjaly (Querist)
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12 June 2023 I am planning to buy an electric car with SBI assured car loan (@rate 9.6%). I am planning to keep enough funds as FD in SBI (@rate 7.5%) in order to get 20 Lakh car loan for a tenure of 60 months and to pay the EMI from its interest. I understand that I can save tax under 80EEB for the interest I am paying for the electric car loan. I unable to work out the mathematics. Can some one advise which one will be economical for me, whether to go with this arrangement (loan on FD and getting tax rebate) or buy the car by paying cash directly? I am a senior citizen. Annual income INR 800,000/- from LIC annuity schemes, FDs and Rentals

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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12 June 2023 Under new tax regime your total tax liability would be just Rs. 35,000/- +cess
While the difference in interest paid over loan to FD is more than Rs. 45,000/-

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Joshy Manjaly

Joshy Manjaly (Querist)
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12 June 2023 Thanks Dhirajlal Sir for quick response

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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12 June 2023 You are welcome.

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